The figures were part of a demonstration of ''collaborative virtual engineering'' - a new approach to product design. The technology enhances teamwork and moves way beyond flat-screen computer-assisted design in the simulation of product ideas.

In this recent demo, one of the figures on the computer screen responded to commands coming over the Internet from a designer in Bristol, England, the other to commands from a demonstrator in Boston.

As one figure lifted the hood of a car and tried to remove an oil filter, he found a hose was in the way. The other figure grasped the hose and bent it so the filter could be more readily removed.

This interchange highlighted a needed design change, since what the figures encountered under the hood represented preliminary design of a car. They talked over the problem and possible solutions by telephone as they went along.

The demonstration, presented by Division Inc. of Bristol, was offered to show two of the latest wrinkles of virtual-reality (VR) design: first, the use of ''immersive'' VR design, and second, the collaborative advantages of doing such design on the Internet.

Immersive technology represents the next step beyond computer-assisted design (CAD), which has been used widely for the past 12 years or so, says Doug Schiff, head of marketing for Division's US operation, based in Chapel Hill, N.C.

CAD offers sophisticated 3D views of objects, but only on a flat screen. VR systems by Division and other firms enable designers to feel they are moving around and looking around an environment the system ''creates.'' They feel inside a 3D environment and can interact with objects and each other visually and audibly.

The users wear a head-mounted display containing a small camera for each eye. The reality they see is virtual - that is, it looks like something but actually is not that something.

More and more companies, including Ford Motor Company of Detroit, McDonnell Douglas Corp. of St. Louis, Bechtel Group Inc. of San Francisco, and BNFL of Preston, England, are beginning to use such immersive VR systems to design and test products and structures before huge sums are spent to build actual prototypes or projects.

Ford, for example, is designing car interiors and car trunks with VR. McDonnell Douglas is using VR to design an engine compartment of a plane so that the entire engine can be changed by a service crew in 30 minutes. BNFL is doing design reviews for nuclear power facilities.

USE of such VR design or ''virtual prototyping'' saves money and time, says Carl Machover, head of the consulting firm Carl Machover Corp. in White Plains, N.Y.

Although software enabling VR design to be done over the Internet is just becoming available, some large corporations are already using VR systems over their private computer networks to put designers and even customers together electronically.

James Korotney, a software engineer for Ford, is using a Division system in efforts to make the interior environment of cars handier and more pleasant. He can use the system to see how much luggage fits into car trunks of certain design. The designers, because of immersive VR, actually feel as if they are picking up luggage and stowing it in a car's trunk, Mr. Korotney says.

''Some 3D design tasks are almost impossible without immersive technology,'' says Ann Lasko-Harvill, a VR design expert in San Francisco. ''Even having three different views of an object on a flat screen is not the same as feeling you are in space with the object being designed.''

The VR industry as a whole - now at about $430 million a year - is growing about 40 percent a year and will for the next five years, Mr. Machover estimates.

''VR is where computer graphics was 25 years ago,'' he says, noting that Division, one of the leaders in VR, is still a small company, with sales of less than $10 million a year.

''People think of entertainment when they hear the term VR,'' he also says, but the total dollar value of professional applications is ''greater than what is spent on VR entertainment.''

Profits, however, won't come quickly to VR companies, claims Barbara Schmitz, an editor and writer for the magazine Computer Aided Engineering in Cleveland. She says only large companies can afford to use it extensively enough to justify the cost. But Division sells its basic system for $75,000, not too high a price for a medium-sized company.

Debbie Nelson, director of marketing for Sense 8, a VR software firm in Mill Valley, Calif., says she thinks Sense 8's profits are going up quickly enough: ''Our business is doubling each year.'' Like Division, Sense 8 sells VR design packages. Division's system is unusual in being an ''off-the-shelf'' package, not needing to be customized for each buyer.